Is there an equivalent for jailbreaking/rooting in Windows Phone 7?

Yes, there is, but currently there is no consensus as to what to call the process as far as I know. Not long ago, the guys over on the XDA developers forum had a poll http://www.forum.xda-developers.com/showthread.php?t=850869
On XDA you will also find info re. how to root/break/hijack a wp7 device.